Article 50 negotiations: Implications of 'no deal' Contents

1The Article 50 process

Box 1: Article 50 of the Treaty on European Union

(1) Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

(2) A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

(3) The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

(4) For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.

(5) A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

(6) If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.

Source: EUR-LEX

The divorce settlement and the future relationship

10.Article 50 leaves considerable room for interpretation regarding the extent to which the ‘future framework’ for relations between a withdrawing state and the remaining EU should be included in the negotiations and the final agreement. Witnesses to this inquiry suggested that the negotiations would be likely to involve three separate but inter-related deals: a “divorce” settlement, a transitional arrangement, and a deal on the long-term relationship.6

11.Thus far, the UK and EU have expressed different views about both the content and the timing of the Article 50 process. As the Prime Minister set out in her Lancaster House speech, the UK Government hopes to negotiate the exit deal and the terms of the future relationship in parallel and to agree both at the end of the Article 50 period.7 Michel Barnier, however, has said the European Commission will only commence talks on the future relationship between the EU and UK after the ‘divorce’ settlement has been reached. On 19 February, for example, the Financial Times reported:

In recent weeks Mr Barnier has outlined to the EU’s remaining 27 members his views on the timing and order of talks, which moves from basic terms for the disentanglement, to scoping future trade relations and finally to preparations for a transition. “He thinks we will be discussing money and acquired rights [of expatriate citizens] until December,” said one senior eurozone official in contact with Mr Barnier. “No trade, nothing about the future, just the past.”8

12.The question of what specific policy issues will be covered by the Article 50 withdrawal deal also has yet to be settled, and is likely to be among the first items to be negotiated by the UK and EU.9 The House of Commons Committee on Exiting the EU concluded in January 2017 that, at a “bare minimum”, by the time the UK leaves the EU, some clarity should have been provided around:

13.The Government has indicated that it intends to pursue the possibility of transitional arrangements, or what it calls “a phased process of implementation.” Calls for implementing transitional arrangements have come from several quarters, including the Committee on Exiting the EU and the Institute of Directors.11 The Government’s White Paper on its objectives for exiting the EU says:

It is [ … ] in no one’s interests for there to be a cliff-edge for business or a threat to stability, as we change from our existing relationship to a new partnership with the EU. Instead, we want to have reached an agreement about our future partnership by the time the two year Article 50 process has concluded. From that point onwards, we believe a phased process of implementation, in which the UK, the EU institutions and Member States prepare for the new arrangements that will exist between us, will be in our mutual interest. This will give businesses enough time to plan and prepare for those new arrangements. This might be about our immigration controls, customs systems or the way in which we cooperate on criminal and civil justice matters. Or it might be about the future legal and regulatory framework for business. For each issue, the time we need to phase in the new arrangements may differ; some might be introduced very quickly, some might take longer. And the interim arrangements we rely upon are likely to be a matter of negotiation. The UK will not, however, seek some form of unlimited transitional status. That would not be good for the UK and nor would it be good for the EU.12

14.If no arrangements for a transitional or implementation phase can be agreed, the UK will leave the EU at the end of the two-year period mandated by Article 50. Even if there is no withdrawal deal agreed by that point, however, the UK and EU might nevertheless wish to continue negotiating over the terms of the UK’s exit and, potentially, the future relationship.

15.We heard two different perspectives on whether it would be possible to resurrect the negotiation process under the terms of Article 50, which could theoretically be advantageous because it requires agreement by a qualified majority of Member States. Any agreement reached under the EU’s normal processes for trade deals with third states would almost certainly require unanimous agreement, and could also require ratification by national and some sub-state parliaments.13 Professor Kenneth Armstrong of Cambridge University offered one view, telling us that “Article 50 does run out at the point where the UK leaves without a deal.”14 However, Professor Derrick Wyatt, speaking on behalf of the Bar Council, disagreed. He said he would be “more optimistic” about the possibility of reviving the Article 50 process as the basis for agreement between the UK and EU, stating: “There is nothing in Article 50 that says you cannot conclude an agreement after exit. You can draw that inference, but it is not actually excluded and it might be a convenient political perception of a legal possibility.”15 Professor Wyatt added that it could also, in theory, be used to put into place a transitional arrangement, stating:

It might become an attractive legal option if both the EU and the UK are over the cliff edge [ … ] applying tariffs to each other, there is a good deal of inconvenience and public opinion is not difficult to manage. It could be a lot more attractive to use a special super-qualified majority to get a transitional arrangement in place than getting into unanimity and potentially mixity for a transitional arrangement.16

6 Q335 [Professor Derrick Wyatt]

8 Alex Barker, “Brussels focuses on UK’s €60bn exit bill before trade talks”, Financial Times, 19 February 2017

9 Exiting the European Union Committee, First Report of Session 2016–17, The process for exiting the European Union and the Government’s negotiating objectives, HC 815, para 56

10 Exiting the European Union Committee, First Report of Session 2016–17, The process for exiting the European Union and the Government’s negotiating objectives, HC 815, para 103

11 Exiting the European Union Committee, First Report of Session 2016–17, The process for exiting the European Union and the Government’s negotiating objectives, HC 815, para 163; Institute of Directors Policy Report, Navigating Brexit: Priorities for business, options for government,(February 2017), p 12

12 HM Government, The United Kingdom’s exit from and new partnership with the European Union, Cm 9417, February 2017, p 65

13 Q335 [Professor Derrick Wyatt]

14 Q335 [Professor Kenneth Armstrong]

15 Q335 [Professor Derrick Wyatt]

16 Q336

10 March 2017